Wage rise is ‘the fastest in Europe’

Business group says economy remains robust

‘Business costs are rising’

IRISH wages are rising at the fastest rate in Europe due to improvements in the economy, a business report said.

The economy is forecast to grow by 5.7% this year on the back of strong consumer spending and increased employment, according to the second quarterly economic outlook by business group Ibec.

The lobby group says households are starting to see the benefits of rising incomes with the economy moving into ‘post-recovery’ stage.

The first quarter of this year saw the fastest wage growth increase since the 2008 crisis and unemployment is set to drop below 5% for the first time since the crash.

Ibec’s head of tax and fiscal policy, Gerard Brady, said households are clearly benefiting from the strong economy but that a greater emphasis needs to be made on improving workforce skills.

‘The story in today’s report is a positive one. The economy is growing, trade remains robust despite Brexit, and households are clearly benefitting through incomes, which are increasing at the fastest rate in Europe.’

Mr Brady added: ‘Last year, 19% of Ireland’s workforce Upbeat: Gerard Brady either changed job or started working. This is up from 13.4% in 2010 and is a sign of the health of the labour market.’

The biggest problem now is finding the right people to fill jobs, he said.

Mr Brady said: ‘With the economy approaching full employment the biggest challenge facing the Irish labour market will be finding workers to fill vacancies.

‘Feedback from Ibec member companies suggests that firms are now finding it increasingly difficult to attract and retain talent.

‘We have pointed out in previous editions of this publication that the outlook for net migration is not as strong as it was in the mid-2000s.

‘There must be a greater emphasis on funding the higher and further education sectors to upskill existing staff.’

Despite the largely good news, the group has warned against complacency and the challenges brought by external threats such as Brexit and most recently, tariffs on steel and aluminium imposed by US President Donald Trump.

Roughly 7% of our steel imports come from the US – the highest rate in the EU.

Mr Brady said: ‘The next downturn is likely to be different than the last. It is crucial we put ourselves in a strong competitive position while we still benefit from global tailwinds.

‘US tax reform, the prospect of a retreat of global trade, and Brexit, will pose challenges for our economy over the coming years. At the same time, business costs are rising and undermining our competitiveness.’

Ibec said the departure of hardline Brexiteers David Davis and Boris Johnson from British premier Theresa May’s government as ‘positive news’ as it was finally allowed the UK government to agree on its position. The report notes that while growth has continued throughout the eurozone, British GDP growth has halved since the Brexit referendum in June 2016.

Ireland’s food sector is the most exposed to the potential fallout of Brexit, with 41% of all exports going to the UK.

Ibec believes that diversification is the key to managing this threat, with some in the sector managing this better than others.

‘In 2018, the share of butter exports destined for the UK was seven percentage points lower than in 2015 for example.

‘This was offset by growing exports to other markets. However, other products have not been as successful.

‘Beef, forestry and vegetable exports have struggled to diversify. The UK now accounts for an even greater share of beef exports than it did in 2015,’ the report says.

Ibec said 36,000 homes need to be built yearly to keep up with the growing population, which it says is a main contributor to rising house prices.

The group does not seem confident in the Government’s pledge to build 20,000 units this year, calling the target ‘ambitious’ and citing the fact that as few as 3,526 units were built in the first three months of this year.